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The Bear nabs the markets, Gold shoots upward

Published: May 2017

The French election is growing closer and the vote on Sunday has the potential to create different scenarios. A victory for Emmanuel Macron is expected to be welcomed by the financial markets, which fear the possibility of seeing Marine Le Pen taking over the Élysée Palace. In the last ten days, we saw the markets “relax” with the euro that strongly recovered against the USD, while gold lost around 3%, falling below $1,250.

This was the result of Macron’s 18 to 20 point advantage in the polls and the assumption that his victory would probably push away the hysteria of a Eurozone dissolution. This scenario lifted the euro above 1.09 against the greenback just after the first round on 23rd of April. After this, the pair moved between 1.085 and 1.095, in theory confirming the recovery of the Eurozone currency.

It appears quite clear that a Le Pen victory could have a much bigger, arguably negative impact on the markets, pushing the euro and stocks markets down, while governments bond yields could increase. While the ‘safe haven’ gold could show signs of recovery.

 

In addition, on the technical side, the situation has improved; while the entire bearish formulation over the last 3 years remains tottering. However, let’s proceed with order: gold first broke its resistance area at $1.113, clearly aiming to attack (then easily break) the next ones at 1.155 and 1.170, then reached its first true obstacle area – $1.200. Just a few hours of hesitation, then prices started to soar again. The break of an important area of dynamic resistance at 1.210-1.220; clearly given by the upper border of that bearish trend which has been containing the prices for almost 2 years. This offered new chances for a recovery, as the ingot reached $1.260 quickly.

Such an attempt to reverse still needs some confirmation, however the break of the bearish trend gives us a clear graphic signal; now Gold, taking advantage of the storms in the markets, may really shine again.

 

Carlo Alberto De Casa

Chief Analyst
Carlo Alberto De Casa is Chief Analyst for the derivatives broker ActivTrades London. He worked for Bloomberg in the City of London before joining in 2011 the Forex Broker ActivTrades,…

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The thoughts and opinions expressed here are solely those of the writer and do not necessarily reflect the view of ActivTrades Plc. This commentary is for information purposes only and should not be considered investment advice. Any forecasts given are not a reliable indicator of future performance and the decision to act on any ideas and suggestions presented is at the sole discretion of the reader.